Forecast rationality tests in the presence of instabilities, with applications to Federal Reserve and survey forecasts

Barbara Rossi and Tatevik Sekhposyan

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper proposes a framework to implement regression-based tests of predictive ability in unstable environments, including, in particular, forecast unbiasedness and efficiency tests, commonly referred to as tests of forecast rationality. Our framework is general: it can be applied to model-based forecasts obtained either with recursive or rolling window estimation schemes, as well as to forecasts that are model-free. The proposed tests provide more evidence against forecast rationality than previously found in the Federal Reserve's Greenbook forecasts as well as survey-based private forecasts. It confirms, however, that the Federal Reserve has additional information about current and future states of the economy relative to market participants.

Keywords: Forecasting; forecast rationality; regression-based tests of forecasting ability; Greenbook forecasts; survey forecasts; real-time data (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Date: 2014-06, Revised 2014-11
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mon
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Forecast Rationality Tests in the Presence of Instabilities, with Applications to Federal Reserve and Survey Forecasts (2016)
Working Paper: Forecast Rationality Tests in the Presence of Instabilities, With Applications to Federal Reserve and Survey Forecasts (2016)
Working Paper: Forecast Rationality Tests in the Presence of Instabilities, With Applications to Federal Reserve and Survey Forecasts (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1426

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